Monday, December 5, 2016

Trudeau to Steal $10,000 From your Grandchildren!

Imagine Justin Trudeau announcing that in order to stimulate the economy, the federal government was going to send each taxpayer a cheque for $10,000.
Most of us would say whoopee!
Some of us, the skeptics, would be a bit wary of Greeks bearing gifts. 

Hmmm...
Now what if Trudeau corrected himself and told us that there was a catch to this windfall, that in fact, your grandchildren will be liable for the debt when they became taxpayers in the future and will bear the cost of paying the interest and principle of the money that you received so generously back in the day when Justin gave it to you.

Think of it as downloading your student loan on your grandchildren.

Would you still accept the money under these circumstances?
I suspect that too many of us would close our eyes, stick fingers in our ears and take the money, because like drugs, free money is a temptation hard to resist.

Around the dinner table amongst family, or on television amid experts, the idea of spending money today and leaving our children and their descendants the bill, rarely makes good conversation.
But it should.
Like the proverbial ostrich that buries its head in the sand, ignoring the issue is manifest denial.

Today, Justin Trudeau is set to add $150 billion dollars to the debt over the term of his first government, something that will cost unborn taxpayers about $10,000 each. This is on top of the $40,000 dollar legacy debt that each of our future taxpayers has inherited from previous governments, starting with Trudeau senior back in the seventies.
This debt by the way, doesn't account for provincial debt which works out, depending on the province where these future taxpayers will live, to about another ten to thirty thousand dollars each of additional debt.
This by the way, is the ultimate "taxation without representation' scenario.

Read: Trudeau government to smash debt and deficit records

Let us not delude ourselves, the debt has grown so large that we cannot pay it off in our generation, especially considering that we are not even trying.
There are those experts who say that Trudeau's lending amounts to less than 10% of government income, not a horribly significant amount, but continue the practice over thirty years and the results are disastrous.

Read: Interest payments on government debt a painful reminder that there are no free lunches

Let us consider a family which 30 years ago had a combined income of $25,000 and which borrowed and spent 10% a year more than they took in and continued this behavior over thirty years.

Thirty years later this family's income would have grown to about $95,000 a year, but the aggregate family debt would be somewhere about $150,000, costing the family about $7,500 a year in interest cost alone.
But what happens when the $95,000 income falls unexpectedly to $90,000 due to market conditions, (which is the case today with falling oil prices.)
Our mythical family is in a precarious position and paying off any of the principle becomes impossible and the idea of stopping borrowing unrealistic, unless the family cuts expenses significantly, something increasingly difficult to do.
At this point, the bank might well refuse further loans, after all, the increasing debt load cannot go on indefinitely. Not a pretty scenario.

It is the same for our federal government, except that Ottawa has a trick to get over the lending ceiling, that is, passing off the debt, promising bankers that future generations will become responsible to take over the debt, something the above analogous family cannot do in good conscious.

The real 'hockey stick' graph
There was a time when the federal government of Canada owed virtually no money. Up to 1970,  Ottawa owed lenders about $20 billion dollars, or about $1,500 dollars for each taxpayer, a paltry sum.
This in the first hundred years of our country, during which we fought two major and two minor wars.
With the election of Pierre-Elliot Trudeau the era of borrow and spend was opened and today each taxpayer owes about $41,000 each, with the federal governments debt sitting at about $700  billion.
Add the provincial public debt and you can add about $10,000 to $30,000 to that number.

The problem is that there comes a point where there is no chance to pay off the principle, considering  the income we take in and the expenses we have and the fact that Ottawa is suffering a poisonous structural deficit, thanks to falling oil prices.

Today  11% of our federal taxes are used to pay off the interest on the federal debt, just about the same amount that we spend on old-age pensions, or the money Ottawa transfers to the provinces. 
And Justin is fixing to raise that percentage another few points with his reckless deficit spending.

So the idea that we'll be able to pay down this debt in our or our children's lifetime is impossible.
Let us wish good luck to our grandchildren and their descendants, they've been drafted to own the debt we have incurred!
But before you complain, remember if you are aged under fifty years old, YOU WERE AND REMAIN the prime beneficiary of this lending and spending orgy.

Today I heard calls from the CBC for additional funding of $400 million, which according to experts would cost each Canadian taxpayer an addition $90 a year.
But this is FALSE!
Considering that the government isn't proposing a new CBC tax, it means that your grandchildren are being asked once more to fund our debt-financed consumption and will assume this additional debt.

Next time Trudeau promises a new program or expenditure, ask yourself if it is fair to our grandchildren who will be obliged to pay the freight.

All we hear from the hypocritical hoity-toity government and popular leaders is that we need to clean up the environment for the benefit of our heirs, yet none is willing to address the dishonest and deceitful practice of downloading our consumption-fuelled debt on our kids.

Let us stop pretending that our politicians and indeed ourselves, care about the welfare of future generations while we frivolously steal from them and this with reckless abandon.
It is despicable, and every time I hear a government official or community leader blather on about saving our planet for the kids, I want to desperately make them understand the utter hypocrisy.

So Justin et al, save the planet by all means, but pay for the effort yourself!

2 comments:

  1. It really doesn't matter what we do regarding borrowing and the national debt.

    Why?

    Because we are inevitably tied to what happens south of our border, in the U.S., where they have to deal with a $20 trillion debt. Relative to the Americans, our debt -- as horrible as it is as Phillip has outlined, above -- is pretty benign: we are sitting pretty with about a third of the debt the Americans have, per capita.

    The thing is that, at some point, the Americans are going to have to hyperinflate their way out of the problem. As long as interest rates remain low, the Americans can service their $20 trillion debt until the cows come home. With low interest rates they can easily service a $40 trillion debt. But once interest rates rise (and they will, at some point), the ONLY way to solve the problem is to print money which will lead, of course, to not just inflation but HYPERinflation. Think Venezuela.

    And hyperinflation, of course, will lead to a massive devaluation of the U.S. dollar.

    And that's where the problem is for Canada. So much of our economy is dependent upon the U.S. buying our products and services that if and when the U.S. dollar is devalued relative to ours, this would adversely affect our exports to them leading to a huge economic problem in Canada.

    So, we can do all the holy and pure things we need to do to get our debt under control. But in the final analysis it will only hurt us when the U.S. dollar is devalued. So we might as well be as irresponsible as the Americans; Trudeau should cast caution to the wind and go full speed in creating those wonderful deficits he is so keen upon. Hey, we should even borrow more! Because in the end we'll just have to keep our dollar pretty much on par with the Americans if we want to save a huge chunk of our economy.

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  2. P.S. I like the "taxation without representation" argument. Indebting our children and grandchildren for debts we are incurring today -- which will be paid by unsuspecting future generations through their tax remittances -- is indeed a form of taxation without being represented for what the money is being spent on (which is happening before they are even born!).

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